Apple cash hoard could hit $170 billion this year

Moody?s Investors Services noted in a report today that Apple's cash pile could reach $170 billion this year if the company doesn't change its policies regarding dividends and stock buybacks.

A report by Marketwatch cited the research note, which alarmingly warned, "unless Apple changes its philosophy towards liquidity/shareholder returns by increasing its $10 billion annual common dividend, or if Apple increases it stock buyback program, we estimate Apple?s cash balances could increase by another $35 billion in 2013 and exceed $170 billion."

Moody's profiled cash stockpiles among non-financial US corporations as amounting to $1.45 trillion at the end of 2012, more than a third of which ($556 billion) is held by tech companies.

Nearly a quarter of the total ($347 billion) is being held by five companies, with Apple at the top of the list with over $137 billion. Microsoft, Google, Pfizer and Cisco round out the top five.

Apple announced plans last year to distribute $2.5 billion each quarter to shareholders as a dividend, and said it would earmark another $10 billion in stock buybacks to offset stock-based compensation. In total, this would amount to around $45 billion over the next three years.

The company has also outlined plans to invest $10 billion in 2013, including nearly $1 billion to enhance and expand its retail stores worldwide, and $9 billion in facilities and infrastructure, including data centers, new office buildings, and manufacturing equipment it will install at its partners' facilities to help guarantee a smooth supply of components.

Despite having articulated plans to put $55 billion of its cash pile to work, Apple continues to generate so much new cash flow that its assets continue to expand. Last quarter, the company added another $16 billion.

While commonly depicted as a cash "hoard," Apple's "cash" is actually conservatively invested in corporate securities (over $46 billion), US Treasury and US agency securities (over $39 billion), and other money market funds, mutual funds, municipal securities and mortgage and asset backed securities, according to the company's most recent 10-K filing.

Isn't it funny how the tone of all Apple news and blogs have changed in last few days! What was "cash" hoarding few days is now "conservatively invested"! Apple faithful! Hang in there! I think you know your company better than all these Wall Street analysts!

Wall Street will not reward Apple if they give more money back to investors. The stock typically changes more in value each day than any plausible quarterly dividend. So how would investors even notice this? This would just be a waste of money.

I don't understand why people on here (or anywhere) want Apple to go private? What is the point of doing that, other than borrowing massive amounts of cash and paying a shitload of taxes to repatriate overseas assets to buy out existing shareholders? Does anyone with half a brain actually expect new, different, or better products?

No, a corporation can't earn too much money. But it can have too much money.

"invested in corporate securities (over $46 billion), US Treasury and US agency securities (over $39 billion), and other money market funds, mutual funds, municipal securities and mortgage and asset backed securities" makes Apple sound like more like a mutual fund that also happens to make products. At some point, and I do not profess to know where that point is, a company has so much money that it spends too much time, attention, and expense managing its money than perfecting its products.

The other problem with having too much cash "conservatively invested" is that inflation will decrease the purchasing power of that money.

Wall Street will not reward Apple if they give more money back to investors. The stock typically changes more in value each day than any plausible quarterly dividend. So how would investors even notice this? This would just be a waste of money.

It's certainly interesting to see the results of Apple's first $45 billion dividend and stock buyback program: the stock went from $619 to $700 and then plummeted to $420 within six months.

In the year prior to announcing the dividend (in March 2012), Apple's stock went from around $330 up to $630.

After announcing it, it dropped $100 in a month, then recovered slightly before dropping $200 as Apple issued 3 dividend payments.

It looks like Steve Jobs was right: you pay a dividend and the cash goes away and the stock doesn't have any reason to move. It now has a reason to drop (the company has slightly less cash!)

So people demanding more dividends: would you rather have $2.65/share every quarter or stock worth +$200 more per share? Kind of a dumb trade.

I don't understand why people on here (or anywhere) want Apple to go private? What is the point of doing that, other than borrowing massive amounts of cash and paying a shitload of taxes to repatriate overseas assets to buy out existing shareholders? Does anyone with half a brain actually expect new, different, or better products?

I'm interested in Apple making better products and not wasting time and capital having to answer to, cater to, defend against litigation etc from publications and hedge funds intent on manipulating stock with predictions and rumor for short-term gains on the backs of investors who believe in the product. I don't think Apple going private or owning a controlling interest, as jragosta suggests as more likely, are mutually exclusive. Spending the liquidity on what is in the best interest of Apple is in the Apple consumer's best interest.

Fortunately, I have more than half of a brain so the ad-hom failed. Borrowing against cash on hand and breaking even on earned vs expensed is a good strategy until the gov catches up. When has legislation ever caught up innovation?

Apple, please set aside a $1 billion commitment per year for 5 years for mapping, and $100 million per year for 5 years for iWork. That's only $1.5 billion after 5 years but I think in that time you could make amazing strides in your products.

Quote:

Originally Posted by jragosta

So Apple will shortly have 1/10 of the entire cash reserves of all of corporate America (not counting finance firms).

Pretty amazing - especially to those who lived through the bleak years in the late 90s.

Does that account for what they have outside the US?

This bot has been removed from circulation due to a malfunctioning morality chip.

Apple, please set aside a $1 billion commitment per year for 5 years for mapping, and $100 million per year for 5 years for iWork. That's only $1.5 billion after 5 years but I think in that time you could make amazing strides in your products.
Does that account for what they have outside the US?

You know what they're going to do with that cash pile don't you. Once it hits 500 billion, they'll buy all outstanding shares and take the company private. Then they won't have to put up with all the nonsense on Wall Street.

Spending the liquidity on what is in the best interest of Apple is in the Apple consumer's best interest.

You state the fundamental flaw in most everyone's argument on here. Customers do not own the company, the shareholders do. It doesn't matter if the company is public or private. A corporation owes a fiduciary duty to its owner, not its customer.

Originally Posted by msuberly
Customers do not own the company, the shareholders do.

Screw 'em. I don't see the shareholders making good decisions or doing any of the work. I see shareholding as a "last resort override" in accountability. Otherwise it's just an opportunity to make money by following what you believe.

Screw 'em. I don't see the shareholders making good decisions or doing any of the work. I see shareholding as a "last resort override" in accountability. Otherwise it's just an opportunity to make money by following what you believe.

That's what I say. The true investors are the consumers that spend their hard earned money buying Apple products and services time and time again, not the ones sitting idly buy holding a few pieces of paper.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

You know what they're going to do with that cash pile don't you. Once it hits 500 billion, they'll buy all outstanding shares and take the company private. Then they won't have to put up with all the nonsense on Wall Street.

It's not worth spending that much to go private and it wouldn't be all at once. Most of the people who are stockholders now have contributed nothing to the company's success so why reward them with money Apple employees have earned?

It would be far better to just ignore that side of Apple and keep it from influencing the running of the company. They will buy back shares over time. Increasing the dividend can be good for Apple staff:

and while they can add value in many of those categories, it might not be enough to distinguish between high growth and me-too. Blackberry is going to face this problem now because they missed the growth and now it's me-too.

Even if they maintain the margins, the lower ASP means they have to vastly increase the volume or it's not worth doing.

The things I'd like to see Apple invest in are ones that offer long-term financial stability. That's in things like the software and media distribution because it adds to the things that compel people to buy into the eco-system. If they owned say Netflix, they'd have established content partners and a subscription base they could use to have a significant presence in movie and TV distribution. iOS devices could ship with the app and have free content as well as in-app purchases and subscriptions.

Amazon could really leverage that because they could do things like advertise kids toys when they watch kids TV shows. They actually bought the Lovefilm service, which is a rival to Netflix, probably because Netflix turned down their crappy offer:

Tim could take Steve's approach and just write down a big number on a piece of paper and get it done. They have over 30 million subscribers. With a bundled app on 100 million devices a year, they can massively increase that and use it as a platform for their keynotes and other media. They can have channels like Youtube but it would be high production value content. They could do it without Netflix but they'd hit the ground running by owning what they've established.

Because the entire eco-system is run by Apple, they can do things like link sharing so for example if you see a good TV show, you can iMessage or tweet a link to the show and clicking it on a Mac or iOS device can open the stream and encourage a subscription or pay-per-view purchase.

I'd like to see more investment in gaming too. I just think it's a major point of leverage on platforms. No matter how much people squabble about the merits of XBox and Playstation, you can't play Gears of War on the Playstation and you can't play Gran Tourismo on the XBox so the exclusivity compels the hardware purchase. Apple doesn't have enough of that exclusive content that is exclusive by their own actions. It would be so cheap for them to do this relative to what they earn and the return would be huge. Regardless of the feelings towards games, there are over 100 million gamers investing in AAA titles and the relevant hardware entirely separate from Apple's eco-system. They need to make the distribution more attractive to content providers by avoiding things like this too:

It's easy to throw out suggestions on how to spend money and they should make their spending decisions wisely but it's becoming clear they are either waiting to do something huge as Steve seems to have alluded to at one point or they just don't know what to do with it that will add value to the company. I'd say owning every kind of digital distribution is a good step to take. I'm not against the idea of a watch or a TV if they can do it right - sure it would be great to be in a meeting and see a text without pulling the phone out your pocket - but watches are much more about fashion than function and people like variety. The TV market is just saturated and isn't very high volume. Samsung's already the largest TV manufacturer and they make less profit than Apple even after including everything they do.

That's what I say. The true investors are the consumers that spend their hard earned money buying Apple products and services time and time again, not the ones sitting idly buy holding a few pieces of paper.

Nope. The consumers are the ones that make the investors money. You buy, I profit. For that I say thank you for making me a multimillionaire.